95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
HB0607


 
Introduced 2/5/2007, by Rep. William B. Black
 
SYNOPSIS AS INTRODUCED:
 		














35 ILCS 130/3-2 new





35 ILCS 135/3-2 new






35 ILCS 143/10-32 new










    Amends the Cigarette Tax Act, the Cigarette Use Tax Act, and the Tobacco
Products Tax Act of 1995. Provides that, beginning on January 1, 2008, a
distributor
may deduct the amount of bad debts from the tax imposed under these Acts.
Provides
that "bad debt" means the taxes attributable to any portion of a debt owed to
the
distributor that is related to a sale of cigarettes or tobacco products subject
to tax under these
Acts, that is not
otherwise deductible or excludable, that has become worthless or uncollectible,
and that
meets other criteria. Effective immediately.
















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FISCAL NOTE ACT MAY APPLY
















 


 


A BILL FOR









 











HB0607

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1
    AN ACT concerning taxes. 

 
2
    Be it enacted by the People of the State of Illinois, 
3
represented in the General Assembly: 


 
4
    Section 5. The Cigarette Tax Act is amended by adding 
5
Section 3-2 as follows:


 
6
    (35 ILCS 130/3-2 new)

7
    Sec. 3-2. Bad debts deductible.

8
    (a) Beginning on January 1, 2008, a distributor may deduct 
9
the amount of bad
debts from the tax imposed under Section 2. 
10
The amount deducted must be charged
off
as uncollectible on the 
11
books of the distributor. If a person pays all or part
of a bad 
12
debt
with respect to which a distributor claimed a deduction 
13
under this Section, the
distributor
shall be liable for the 
14
amount of taxes deducted in connection with that
portion of the

15
debt for which payment is received and shall remit these taxes 
16
in his or her
next payment
to the Department under Section 3.

17
    (b) Any claim for a bad debt deduction under this Section 
18
shall be supported
by all of the following:

19
        (1) A copy of the original invoice.

20
        (2) Evidence that the cigarettes described in the 
21
    invoice were delivered
to
the person who ordered them.

22
        (3) Evidence that the person who ordered and received 
23
    the cigarettes did
not pay the distributor for the 
 


 






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1
    cigarettes and that the distributor used
reasonable

2
    collection practices in attempting to collect the debt.

3
        (4) As used in this Section, "bad debt" means the taxes 
4
    attributable to
any
portion of a debt that is related to a 
5
    sale of cigarettes subject to tax under
Section
2 that is 
6
    not otherwise deductible or excludable, that has become 
7
    worthless or
uncollectible in the time period between the 
8
    date when taxes accrue to the
State
for the distributor's 
9
    preceding tax return and the date when taxes accrue to
the

10
    State for the present return, and that is eligible to be 
11
    claimed, or could be
eligible
to be claimed if the 
12
    distributor kept accounts on an accrual basis, as a

13
    deduction
pursuant to Section 166 of the Internal Revenue 
14
    Code. A bad debt shall not
include any interest on the 
15
    wholesale price of a cigarette, uncollectible
amounts
on 
16
    property that remains in the possession of the distributor 
17
    until the full
purchase
price is paid, expenses incurred in 
18
    attempting to collect any account
receivable or
any portion 
19
    of the debt recovered, any accounts receivable that have 
20
    been sold
to
a third party for collection, and repossessed 
21
    property.



 
22
    Section 10. The Cigarette Use Tax Act is amended  by adding 
23
Section 3-2 as follows:
 
24
    (35 ILCS 135/3-2 new)

 


 






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1
    Sec. 3-2. Bad debts deductible.
2
    (a) Beginning on January 1, 2008, a distributor may deduct 
3
the amount of bad
debts from the tax imposed under Section 2.  
4
The amount deducted must be
charged off
as uncollectible on the 
5
books of the distributor.  If a person pays all or part
of a bad 
6
debt
with respect to which a distributor claimed a deduction 
7
under this Section, the
distributor
shall be liable for the 
8
amount of taxes deducted in connection with that
portion of the

9
debt for which payment is received and shall remit these taxes 
10
in his or her
next payment
to the Department under Section 3.
11
    (b) Any claim for a bad debt deduction under this Section 
12
shall be
supported by
all of the following:
13
        (1) A copy of the original invoice.
14
        (2) Evidence that the cigarettes described in the 
15
    invoice were delivered
to
the person who ordered them.
16
        (3) Evidence that the person who ordered and received 
17
    the cigarettes did
not pay the distributor for the 
18
    cigarettes and that the distributor used
reasonable

19
    collection practices in attempting to collect the debt.
20
        (4) As used in this Section, "bad debt" means the taxes 
21
    attributable to
any
portion of a debt that is related to a 
22
    sale of tobacco products subject to tax
under
Section 10-10 
23
    that is not otherwise deductible or excludable, that has 
24
    become
worthless or uncollectible in the time period 
25
    between the date when taxes
accrue
to the State for the 
26
    distributor's preceding tax return and the date when taxes

 


 






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1
    accrue to the State for the present return, and that is 
2
    eligible to be claimed,
or
could be eligible to be claimed 
3
    if the distributor kept accounts on an accrual
basis,
as a 
4
    deduction pursuant to Section 166 of the Internal Revenue 
5
    Code. A bad debt
shall not include any interest on the 
6
    wholesale price of a tobacco product,
uncollectible 
7
    amounts on property that remains in the possession of the

8
    distributor
until the full purchase price is paid, expenses 
9
    incurred in attempting to
collect any
account receivable or 
10
    any portion of the debt recovered, any accounts
receivable

11
    that have been sold to a third party for collection, and 
12
    repossessed
property.

 
13
    Section 15. The Tobacco Products Tax Act of 1995 is amended  
14
by adding Section 10-32 as follows:
 
15
    (35 ILCS 143/10-32 new)

16
    Sec. 10-32. Bad debts deductible.


17
    (a)  Beginning on January 1, 2008, a distributor may deduct 
18
the amount of
bad
debts from the tax imposed under Section 
19
10-10. The amount deducted must be
charged
off as uncollectible 
20
on the books of the distributor. If a person pays all or
part 
21
of a bad
debt with respect to which a distributor claimed a 
22
deduction under this
Section, the
distributor shall be liable 
23
for the amount of taxes deducted in connection with
that 
24
portion
of the debt for which payment is received and shall 
 


 






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1
remit these taxes in his or
her next
payment to the Department 
2
under Section 10-30.

3
    (b) Any claim for a bad debt deduction under this Section 
4
shall be supported
by
all of the following:

5
        (1) A copy of the original invoice.

6
        (2) Evidence that the tobacco products described in the 
7
    invoice were
delivered to the person who ordered them.

8
        (3) Evidence that the person who ordered and received 
9
    the tobacco
products did not pay the distributor for the 
10
    tobacco products and that the
distributor used reasonable 
11
    collection practices in attempting to collect the
debt.

12
        (4) As used in this Section, "bad debt" means the taxes 
13
    attributable to
any
portion of a debt that is related to a 
14
    sale of tobacco products subject to tax
under
Section 10-10 
15
    that is not otherwise deductible or excludable, that has 
16
    become
worthless or uncollectible in the time period 
17
    between the date when taxes
accrue
to the State for the 
18
    distributor's preceding tax return and the date when taxes

19
    accrue to the State for the present return, and that is 
20
    eligible to be claimed,
or
could be eligible to be claimed 
21
    if the distributor kept accounts on an accrual
basis,
as a 
22
    deduction pursuant to Section 166 of the Internal Revenue 
23
    Code. A bad debt
shall not include any interest on the 
24
    wholesale price of a tobacco product,
uncollectible 
25
    amounts on property that remains in the possession of the

26
    distributor
until the full purchase price is paid, expenses 
 


 






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1
    incurred in attempting to
collect any
account receivable or 
2
    any portion of the debt recovered, any accounts
receivable

3
    that have been sold to a third party for collection, and 
4
    repossessed
property.



 
5
    Section 99. Effective date. This Act takes effect upon 
6
becoming law.